The government is always busy looking and reviewing businesses or ideas to aid or drop their support, and next year will be no different. Sometime in 2017, they plan on taking a closer look at renewable energy sources and see if they can stop funding for any of them. One of the largest tax credits that are supplied by the government for solar energy is soon to expire by the end of next year.
Sadly, the tax credit for wind energy was already deceased. The government provided around $25 billion from 2009-2014 for solar and wind energy developers. This resulted in a 12-fold increase in established capacity over the last ten years, which helped in reducing expenses annually by 10% per consecutive year. With all money spent on solar and wind, these two types of energy only makes up fewer than 5% of the electricity that people use in America.
The main reason the government wants to cut off providing financial aid is because they’re competing with natural gas and dirt cheap coal. The NYSE Bloomberg Global Solar Energy Index, as well as large developers such as First Solar and SunEdison, fell by a massive 35% since June, while the wind index decreased by 20%.
Both wind and solar developers are moving as fast as lightning to complete current projects because they know they don’t have much time before funding gets cut off. Eight and a half gigawatts worth of solar capacity will be on the web this year, and a minimum of eleven gigawatts is expected to be online next year. With the solar developers soon to run out of credit, which reimburses them about 30% of a project’s cost, Bloomberg New Energy Finance believes the installations will fall by a whopping 70% in 2017. Rhone Resch, head of trade group Solar Energy Industries Association, states that the reduction of tax incentives will cost them $25 billion in economic activity and 100,000 fewer jobs.
According to Bloomberg, without subsidies, solar costs 35-40% more and without it, solar in a lot of countries remain to be much more costly than coal, nuclear, and natural gas. Although wind developers will be experiencing deficits in various areas, overall they will be in better shape compared to the solar developers. A part of the reason is that they already experienced this situation once before, so they’re more prepared.
For wind energy developers, they faced a 90% loss because the largest federal subsidy funding was cut off during installations around 2014. The $23 per megawatt hour tax credit was retroactively stretched to handle any projects under construction last year, and remains in limbo.
Nevertheless, even without the tax credit, turbines are just as up to par with fossil fuels in certain areas of Oklahoma and Texas. The government is investing less with these developers because they are following in Europe’s footsteps. After several years of generously giving a lump sum of money away from renewable resources, Spain, the Czech Republic, and Germany recently cut back on the flow. This coming January, the United Kingdom plans to cut subsidies for rooftop solar panels by almost 90%. Jigar Shah, founder of SunEdison, says that America and Europe are doing this a part of an investment cycle that is travelling in phases around the globe. He also stated that the benefits created a global industry that’s more than able to transfer to hot markets.
Another reason renewable sources are getting dropped is likely the expense. Energy Secretary Amber Rudd wants to cut solar subsidies to tackle the spiraling renewable electricity bills. These bills are projected to hit $138 billion by 2020, which is $2.3 billion more than originally believed. The increase will likely add an estimated $31 billion in utility bills. Subsidies for “tiny” solar farms with fewer than five megawatts (about the size of fifteen football pitches) will get cut.
Also, a key payment plan will be completely closed a year sooner than planned. An analysis by the Renewable Energy Foundation states that over 200 projects are pending construction or are in the processing of getting approved. Taking a closer look at subsidies, plus solar panels made for houses, is expected to take place at the end of the year.
Rudd also firmly stated that renewable energy companies can’t put themselves in a situation where the industry continually writes a blank check and people end up paying more. Rudd wants to make certain that everyone’s bills remain low in respect of the additional subsidies for renewable energy sources. Rudd adds that it was negligible on their part for dismissing all industry claims that the impact occurring on utility bills was from solar.
She will make certain that the costs related to solar will not reflect and get added to everyone’s bills. Rudd already talked about an early shutdown of the primary subsidy for onshore wind farms and the shutdown of the massive solar farms this past April as well. Rudd stated that she was not trying to rule out continual subsidies for solar developers. Her plan is to cap future solar support until further notice. At the moment, subsidies are automatically available to any project that can get built in time so there is no such thing as a quota of signups. A new plan where funds are tightly rationed is getting implemented, as well as caps on budgets and projects forced to contest for available subsidies. Rudd goes on to say that they don’t want to have a system where there is essentially infinite headroom for renewable sources, including solar energy.
As expenses continue to decrease, it will become simpler for certain areas of the renewable industries to survive even without subsidies. Rudd hopes to plan on implementing this to protect consumers, as well as protect existing investors.